China widens yuan daily trading band to 2 pct

BEIJING, March 15 (Xinhua) -- China will widen the yuan's daily trading band from the current 1 percent to 2 percent starting next Monday, the country's central bank said Saturday.

Starting March 17, Chinese banks can exchange the yuan in the foreign exchange spot market at 2 percent above or below the central parity against the U.S. dollar announced by the China Foreign Exchange Trading System each trading day, according to the statement from the People's Bank of China (PBoC).

The move will enhance the floating flexibility of the renminbi exchange rate and improve the efficiency of capital allocation, facilitating economic restructuring and beefing up the decisive role of the market in allocating resources, the PBOC said in a statement on its website.

China takes a gradual and steady pace in raising its currency's daily trading limit, from 0.3 percent in 1994 to 0.5 percent in 2007 and 1 percent in 2012 to the latest 2 percent.

The Chinese yuan experienced continued weakening against U.S. dollar in February, causing widespread concerns over its domestic and international impacts to trade and the financial sector. < The widening of the trading band will not lead to steep depreciation of the Chinese yuan, the statement said, citing improving balance of payments and rich foreign exchange deposit.

The central bank respects the market rule and their reactions and mainly focuses on mid-term changes of the yuan's exchange rate, Zhou Xiaochuan, governor of PBoC, said last week.

It will prompt enterprises and residents to pay more attention to the exhange rate's role in allocating market resources, the statement said.

PBoC will further push the liberalization of yuan's exhange rate and diversify foreign exchange products to build a market-guided and properly regulated floating exchange rate system, the statement added.

The central parity rate of the yuan against the U.S. dollar is based on a weighted average of prices before the opening of the market each business day.